The following figures relate to monthly observations of the percentage return on a widely used stock market index

(Rm) and the return on a particular ordinary share (Rj

) over a period of six months.

Month Rm Rj 1

2 3

4 5

6 5

-10 12 3

-4 7

4

-8 9.6 2.4

-3.2 5.6

(a) Plot these data on a graph and deduce the value of the Beta coefficient.

(b) To what extent are variations in Rm due to specific risk factors?

(c) Calculate the systematic risk of the security. (NB: systematic risk = b2 s2 m)